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Study on Non Banking Financial Companies in India

5.1 List of major products offered by NBFCs in India

1) Funding of commercial vehicles

Deciding not to grow is a tough call that any business is forced to take during any period of

its life cycle. The chief executives of non-banking finance companies (NBFCs), particularly

those funding commercial vehicles and equipment, did exactly that when the economy came

to a grinding halt some time back. And that decision is yet to be revoked, in a telling sign that

5. Product Profile

Funding ofcommercial

vehicles

Funding ofinfrastructure

assets

Consumerdurables and

two wheelers

Microfinance

Gold loans

Funding ofplant andmachinery

Loan againstshares

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the core of the economy is still to get out of the woods."The disbursements have slowed

down because of the fact it was a conscious decision. But even for those offering loans for

commercial vehicles, things are yet to look up. Sales of commercial vehicles is key

barometer of economic activity in a country more sales of trucks usually indicate more goods

being transported for consumption or more capital equipment being taken to project sites to

start construction.

2) Funding of infrastructure assets

NBFCs also increased their lending sharply as the credit demand for power and roads

expanded. The major Infrastructure Finance Companies (IFCs) which could be considered

for estimating infrastructure finance are Power Finance Corporation (PFC), Rural

Electrification Corporation Limited (REC), IDFC Limited, India Infrastructure Finance

Company Limited (IIFCL), L&T Infrastructure Finance Company Limited and IFCI Ltd.

Going forward, high historical growth rates observed in the past may not be feasible since

NBFCs would need to take up further capital raising exercise to be able to lend significant

amounts.

3)

Retail financing

Retail banking aims to be the one-stop shop for as many financial services as possible on

behalf of retail clients. Some retail banks have even made a push into investment services

such as wealth management, brokerage accounts, private banking and retirement planning.

While some of these ancillary services are outsourced to third parties (often for regulatory

reasons), they often intertwine with core retail banking accounts like checking and savings to

allow for easier transfers and maintenance.

4) Loan against shares

Loans against shares or securities are a great way of raising capital when one is in need of

funds. These types of loans are given by banks in the form of overdraft against the shares

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held by the customer. The biggest benefit of this is that it enables the customers to get instant

liquidity without selling their securities and when one repays the debt he or she gets back the

shares from the bank thus there is no liquidation of stocks.

5) Funding of plant and machinery

A plant or machinery lease is:

under which a lessor grants another person the right to use the plant and machinery for a

period of time; and

which is treated under generally accepted accounting practice as a lease;

An agreement or arrangement which is treated under generally accepted accounting practice

as a lease and conveys or would convey the right to use an asset which is plant or machinery;

the finance lease element of a sale and finance leaseback. If a lease would satisfy the

conditions for being a plant or machinery lease immediately after the commencement of its

term treat it as a plant or machinery lease from its inception.

6) Gold loans

This is the loan given against gold. Many nationalized banks, private banks and other

financial companies offer this loan at attractive rates. Many go for this loan for short period

to meet the requirement of their childrens education, marriage and other financial problems

in the family. And others think that instead of keeping the gold idle at home or locker, loan

against gold is the best option. Moreover with the rise in gold rates the demand from

companies and banks offering such loans has raised. For instance, Muthoot Finance, one of

the leading gold loan companies has seen 24 percent rises in gold loan against 17 percent

raise in the market value of gold.

7) Microfinance

Microfinance services as opposed to financial services in general are retail financial

services that are relatively small in relation to the income of a typical individual. Specifically,

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